a visit to the milk market final

8/2/2019 A Visit to the Milk Market Final

1/23

A Visit to the Milk Market

Presented by

Indian Institute of Management Lucknow


2/23


3/23

Milk Industry in India

India is the largest milk

producer in the world, 100million tonnes

1/5thof the world bovinepopulation

Productivity boom throughoperation flood.


4/23

Milk Industry in India

Dairying is a part of the farming system

Comprises about 1/3rd of the rural incomes

Livestock is a securityasset to be sold in times of

crisis

75 % of HH have 2-4 animals on average


5/23


6/23

Administration

There is no paper work involved.

The Mandi Adhikari periodically visits the dairymarket for supervision.

Two permanent security staff are stationed in themarket.


7/23

Milk Market Advantage

Price at milk market fetches at least Rs 3/litre morethan co-operative dairy procurement price in villages.

Dairies in villages procure milk at lower price.

Dairies usually decide price for milk after testing for fatcontent, but here it is done manually throughexperience of the traders.

No taxes/fees collected from sellers.

Household distributors in the city prefer to procuremilk in market rather than going to villages.


8/23

Milk Trading

About 500 people visit the market everyday. This number includesbuyers as well as sellers

The total volume of trade per day is around 3500 litres

On an average each seller sells about 20-30 litres of milk eachday

The excess milk, which remains unsold at the end of the day, iscollected at a reduced rate by paneerdealers and sweet makers.Hence the entire milk that is brought to the market by a seller isultimately sold.


9/23

Milk Trading

Market surviving on traditional channels of marketing.

Traders procure milk from farmers in villages.

Arbitrage advantage in milk market compared to thatof co-operative channels in villages.

Price advantage is huge on days with lower supply.


10/23

Buyers and Sellers

Farmers and traders from villages as far as 30km inand around Lucknow form the sellers as well as buyers

Household milk distributors are the major customerbase at the market

Unpredictable supply and demand results in variationof selling price per litre


11/23

Buyers Profile

Common people/farmers coming to the market topurchase milk

Sweet sellers, curd & paneer makers

One seller purchasing milk from another seller at lower

rate to satisfy his additional demands and sell tohouseholds at higher rate


12/23

Buyers Profile

Name : Ram Prasad.

Age : 36 years.

Location : Daliganj

Primary Occupation : Milk Vending

Buys milk from the market and sells in

the city.

Came on his bicycle with two empty cans. He is willing to buy40 litres of milk at the rate of about 14-15 rupees per litre.

The sale price in the city is about 22 rupees per litre.

Thus he makes a profit of about 300 rupees.


13/23

Sellers Profile

Farmers owning buffaloes/cows producing milk and

they themselves comes to market milk.

Sellers who buy milk from the small farmers from thevillages and sell the milk in milk market.


14/23

Sellers Profile

Name : SantRam Pandey

Age : 32 years Location : Bakshi Ka Talab

Primary Occupation : Farming

He owns 8 buffaloes.

Travels on a bike. He brings about

50 litres of milk in two cans. The expense he incurs (inclusive of travelling expenses) is

about Rs 10/litre and he sells it at a rate of about Rs 18/litre.

Thus, he makes a profit of about 400 rupees in a day.


15/23

Sellers Profile

Name : Deen Dayal Yadav

Age : 40 Location : Mohanlalganj

Primary Occupation : Milk Vending

Buys milk from many farmers and sells in

the milk-market.

Travels on bicycle. He brings about 50 litres of milk in twocans.

The cost price of the milk is on an average Rs 12/litre and heexpects to sell it at a rate of about Rs 18/litre.

Thus, he makes a profit of about 300 rupees in a day.


16/23

Determining Price

Premium on fat content hence buffalo milk fetcheshigher price, cow milk pricing based on total solids

Farmers price is about Rs. 15 for cow milk and Rs. 20for buffalo milk(1 litre bottle of water costs Rs. 12)

Price is dependent on supply and demand in themarket on the particular day.

Seasonal dependency: High prices in summer whensupply is low and Lower prices in winter when thesupply is high.


17/23


18/23

Milk production

Average yield of milk per cow is 15-20 lts/day.

Average yield of milk per buffalo is 9-12 lts/day.

Yield per animal is very low compared to many othercountries.

Average yield per animal in India is 1000 lts/yearcompared to world average of 2100 lts/year.

(Source : CIFTI AGM 2004) Poor feeding practices do not enable farmers to

capitalize on potential.


19/23


20/23

Way Ahead

Milk market lacks private cold storage players as in

fruit market. Transparency can be improved by introducing

electronic milk-o-meters.

Can evolve as a hub for marketing other dairy

products. Regulatory role of government in case private sector

gets increasingly active.


21/23

Potential to beUnleashed

Poor access to institutional credit

Credits through informal procurement channels are at

very high loan rates, and results in exploitation offarmer through lower milk prices

Dairying is a part of the farming system.

Traditional practice of selling rather than unleashing

new channels. Competition does not exist at village level for

procurement which results in lower milk prices oftendecided by local agents.


22/23


23/23

Thank You

a visit to the milk market final

Documents